Mortgage rates remain elevated as inflation tops 3%, with the average 30-year mortgage rate now over 7%.
In December, the Federal Reserve hinted it would make multiple interest rate cuts in 2024 if the inflation cools. However, recent indications from a Fed official indicate that cuts may not be possible this year.
"If we continue to see inflation moving sideways, it would make me question whether we needed to do those rate cuts at all," Federal Reserve Bank of Minneapolis President Neel Kashkari said in an interview with Pensions & Investments magazine posted on LinkedIn.
What Can Happen if Mortgage Rates Don't Fall This Year?
If mortgage rates remain elevated throughout 2024, here are some possible scenarios that may unfold in the housing market.
Home Prices Will Increase
Should mortgage rates remain high, home prices may also see a continuous increase, Brad Dillman, chief economist at property management and development company RPM Living, told CBS News.
However, Dillman said the rising prices of homes in the U.S. are also influenced by the lack of inventory in the housing market and the underbuilding of single-family homes in the 2010s.
As of March, the median home sale price in the U.S. is $420,321, according to Redfin. This marked a 4.8% year-over-year increase.
Home Prices Won't Increase Much
In contrast to Dillman's prediction, Afifa Saburi, a capital markets analyst at Veterans United Home Loans, predicts home prices will likely hold steady or see minimal drops or increases due to a lack of shortage.
Saburi also noted that home prices likely won't budge until the housing market sees a significant increase in inventory or until mortgage rates drop to the 4% range.
What Is the Current Mortgage Rate?
The mortgage rate for the 30-year fixed loan is at 7.24% as of Monday, May 6. That marked a 0.11% increase from last week's 7.13%. The rate for the 15-year mortgage also increased by 0.11% to the current 6.75%, per Mortgage News Daily.
Mortgage rates are unlikely to decline to 4% this year. A forecast from the Mortgage Bankers Association expects rates to fall to only 6.4% by the end of 2024.
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